Nuclear risks grow as new arms race looms—new SIPRI Yearbook out now

The SIPRI Yearbook 2025 indicates a concerning trend of growing nuclear arsenals and weakened arms control regimes, signaling a potential new nuclear arms race. Nearly all nine nuclear-armed states are actively modernizing their weapons, with China's arsenal expanding at the fastest rate, potentially possessing as many ICBMs as Russia or the USA by the end of the decade. Despite the New START treaty remaining in effect until 2026, there are no signs of renewal, and the rapid development of technologies like AI and cyber capabilities further complicates nuclear capabilities and increases the risk of conflict.

Analysis

The Stockholm International Peace Research Institute's (SIPRI) Yearbook 2025 reveals a significant deterioration in global security, marked by an emerging and dangerous nuclear arms race and the severe weakening of arms control frameworks, reflecting the report's 'extremely negative' sentiment and 'pessimistic' tone. Nearly all nine nuclear-armed states—the United States, Russia, the United Kingdom, France, China, India, Pakistan, North Korea, and Israel—continued intensive nuclear modernization programs in 2024. The global inventory of nuclear warheads was estimated at 12,241 in January 2025, with about 9,614 in military stockpiles for potential use, and approximately 2,100 deployed warheads kept in a state of high operational alert, predominantly by Russia and the USA. Notably, China's nuclear arsenal is expanding faster than any other nation's, growing by about 100 new warheads annually since 2023 to reach at least 600 by January 2025, and potentially achieving ICBM parity with Russia or the USA by the turn of the decade. The long-standing post-Cold War trend of diminishing nuclear weapon numbers is ending, as dismantlement slows and new deployments accelerate. Russia and the USA, which together possess around 90% of all nuclear weapons, are likely to increase deployed warheads after the New START treaty expires in February 2026, despite facing challenges in their respective modernization programs. Other nuclear states, including the UK, France, India, Pakistan, North Korea, and Israel, are also advancing their capabilities, with a recent India-Pakistan conflict highlighting the risk of conventional conflict escalating to a nuclear crisis. Compounding these risks is the rapid development of technologies like artificial intelligence (AI), cyber capabilities, space assets, and quantum computing, which are radically redefining nuclear deterrence and increasing instability, rendering traditional arms control formulas insufficient. The election of Donald Trump also introduces additional uncertainty regarding the future direction of US foreign policy.

Key Decisions for Investors

• Investors should brace for increased market volatility and consider portfolio hedging strategies due to the heightened geopolitical risks associated with the escalating nuclear arms race and deteriorating international security environment.
• Closely monitor developments concerning the New START treaty's expiration in February 2026 and any shifts in nuclear doctrines or defense spending by major powers, as these will be critical indicators for global stability and defense sector valuations.
• While the report highlights the transformative impact of AI, cyber, and quantum technologies on defense, investors should exercise caution and seek specific corporate involvement in defense applications before making direct investment decisions, as the article does not name individual commercial entities.